Compass Group reported strong third-quarter results with 8.6% organic revenue growth. The company raised its full-year outlook, expecting organic revenue growth above 8% and operating profit growth of 11%. They also announced the acquisition of Vermaat for EUR 1.5 billion. North America drove the results with 9.6% organic growth, outperforming Sodexo.

The acquisition of Vermaat aligns with Compass Group’s strategy to expand its scale and brand portfolio in Europe. The transaction, subject to regulatory approval, is expected to be accretive to earnings per share and margins in the first year. Compass Group’s net new business growth hit the midpoint of its target range, with a 96% client retention rate.

Maintaining a fair value estimate of GBX 2,550 and a narrow moat rating, Morningstar views Compass Group as fairly valued post-results and deal announcement. The Vermaat acquisition is seen positively, given Compass Group’s successful track record of integrating new businesses in North America. The company is expected to replicate this strategy in Europe.

Read more at Morningstar: Solid Results; Vermaat Acquisition Coherent With Strategic Framework